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MULTI-ASSET APPROACHES TO RISK

Financial Advisory

29 April 2021

AssetClientcostESGFCAFinancial AdvisoryfundRisksustainableWinning Advisers

Multi-asset approaches to risk

Expert: Shane O’Brien, Senior Investment Director, Aviva Investors
Facilitator: John Chapman, Consultant, Orion Consultancy Ltd 

Key Takeaways:

  1. There has been a big move in recent years and a continuing trend for clients’ assets to be moved from older type mixed investment funds to risk targeted funds

Key reasons advisers will move clients to a volatility targeted fund is a combination of a number of factors but primarily it will be having more control over the asset allocation. Cost to client is not a key factor in this move.

Pre-RDR pricing of some of these multi asset funds is an opportunity to move to a better solution for the client.

Client segmentation is key and understanding the needs of a different cohort of clients.

  1. There has also been a huge move from premium active multi asset funds to passive, low cost multi asset funds

There is still a market for premium active multi asset funds but, it would have to be stellar over performance and it could be clearly demonstrated to the client that the additional cost is worth paying for.

Multi asset solutions are probably a default option, particularly in auto enrolment environment and low cost is therefore a key advantage in these segments. There is no market for premium multi asset solutions in the auto enrolment market.

  1. In recent years we have seen huge flows into sustainable funds

87% of advisers are planning on changing their process on how they ascertain their clients ESG preferences. This is not surprising as the FCA are making it mandatory.

Clients desire for ESG is usually driven by the adviser commencing the discussion rather than the client raising the issue.

Context:

There are over 750 multi asset funds in the UK

Research has shown that fund flows for the last three-year average have demonstrated the following:

Low Cost Multi Asset                             £7.8bn             Trend : Very Strongly Upward

MPS                                                     £5.4bn             Trend : Strongly Upward

Sustainable Multi Asset                          £2.9bn             Trend : Strongly Upward

Smooth Managed                                  £5.8bn             Trend : Flat

Premium Multi Asset                            -£0.5bn             Trend : Strongly Downward

Income                                               -£0.4bn             Trend : Strongly Downward

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